Here is an interesting question for you. What is the best experience and qualifications for a CEO? As always with this type of question the answer must be prefaced by "it depends". If the company is haemorrhaging money and is in need of strict financial controls, then we can imagine that someone with accounting and finance experience would be a good person to be in charge. Or would they?
Jan Carlzon is not an accountant. He received an MBA from Stockholm School of Economics in 1967 and then joined Sweden's largest tour operator, first as a product manager and later as head of marketing. Here he learned the importance of customer experience which he used to great effect when he took over the helm of SAS, the ailing Swedish airline that was losing $17 million per annum in the early 1980s. Instead of cutting costs left right and centre, Carlzon focused on people within SAS and turned them into customer ambassadors. They ensured that every point of contact with the customer was a moment of truth at which they hoped to meet or beat the customers’ expectations. The results were amazing. The company bounced back into profits and became a leader in airline punctuality and customer service.
A survey of the Financial Times Stock Exchange (FTSE) 100 companies shows that 55% of the CEOs have a career background in finance against only 15% in marketing. This is no surprise. Big and powerful companies put more emphasis on finance than they do their customers.
We would even go so far as to say that many of them treat customers with disdain. Of course, they would deny this. They certainly wouldn't say that they are disdainful of their customers. And yet, surveys of customers of large companies show that they are paying a loyalty penalty by being charged higher prices than new customers. Among large insurance companies, almost all their profits are from customers who have held policies for more than six years.
If they cared about customers there wouldn’t be a massive opacity in pricing. How many customers know what “normal” prices are? When you buy from a large B2B company you usually have no idea what other customers are paying for the same products. Price comparisons are made deliberately difficult.
And then there is human nature. If customers could choose, they wouldn't spend time finding new suppliers, changing accreditations and going through the problems of switching. It is easy to exploit the inertia factor by gouging the prices of the most loyal customers.
So why don't more CEOs follow Jan Carlzon’s example of building profits by improving customer experience? It isn’t the first thing someone trained in finance thinks of. And frankly, the customer experience route is more difficult. Exploiting loyal customers, cutting costs, and raising prices by 10% are all easy compared to the culture changes needed to deliver great customer experience. CEOs of UK listed companies have an average tenure of only 4.8 years (one of the shortest in the world) and with such little time in the hot seat, they don't tend to think about the long-term consequences of their actions. They are measured on quick financial returns.
It's worth reminding ourselves of the dictum from the management guru Peter Drucker who famously said that the purpose of business is "to create a customer". For this, he claims, a business requires only two basic functions – innovation and marketing. In a world where emotion and human connections are becoming increasingly more important, we can see that marketing and customer experience must become an important qualifier for new CEOs.